Assignment: International Trade
A) Assess the impact of IMPORTS, assuming that the world price is below the domestic price:
• If the world price is below the domestic price, what do imports do to the domesticsupply of roses
• What does the increased supply of imported roses do to the domestic price ofroses?
• What does the lower price do to domestic producers' incentive to produce?
• What does a lower price do to the quantity demanded by domestic consumers?
• Does the amount of consumer surplus increase or decrease?
• What happens to domestic producer surplus?
B) Assess the impact of EXPORTS on domestic supply and demand, assuming that the world price is higher than the domestic price:
• If the world price is higher than the domestic price, what will domestic producerswant to do?
• What does the quantity exported do to the domestic price?
• What does a higher domestic price do to the quantity consumed domestically?
• What has happened to the domestic consumer surplus?
• What has happened to the domestic producer surplus?